EDITORIAL Sports Law & Taxation, Nr. 4, December 2021
It is with much pleasure that we welcome readers to the December 2021 edition (citation: SLT 2021/4) of our ground-breaking journal Sports Law and Taxation (SLT) and on-line database www.sportslawandtaxation.com.
The past year 2021 has again been a challenging one with the economic effects of the COVID-19 pandemic still being felt around the world, not least on sport, although the postponed 2020 Tokyo Summer Olympic Games, despite opposition to them because of the pandemic, took place under unprecedented conditions, mainly without spectators, but notwithstanding these restrictions the Games were generally regarded as a success.
However, it has not all been doom and gloom on the sporting front during this year. In fact, some sports have benefitted from “lock downs” due to the pandemic. See, for example, esports below.
There have also been a number of major sporting achievements and highlights during the year, with association football again dominating the sporting headlines, and some of these developments will now be briefly mentioned as follows.
Esports continued growth
In 2020, esports stocks soared, whilst traditional sports stocks declined due to the pandemic.
Newzoo’s latest esports market report shows that global esports revenues will grow to more than US$ 1.1 billion in 2021, with an annual growth of almost 15%.
Over 75% of these revenues is expected to come from media rights and sponsorship.
There is also a 10% annual growth in the global games live-streaming audience, expected to reach almost 730 million people. The majority of this audience is below 34 years old.
Stakeholders expect the growth and increase in revenues to continue.
As these expectations grow and grow, pricings of these expectations also increase, creating an overwhelming investment sentiment for esports in general.
With so many people around the world working remotely and students attending online classes, this gives the esports industry a unique edge. Even when the pandemic ends, this trend of increasing revenues for esports and big gains for investors is not expected to slow down soon, if at all.
In fact, 22% of the internet population participates in esports, with 39% of that audience being between the ages of 25-34.
A pair of trainers belonging to the basketball “star”, Michael Jordan, were sold for a record sum of US$ 1.47 million at an auction held by Sotheby’s in Las Vegas on 24 October 2021.
The red and white Nike Air Ships trainers, which were signed by Jordan, were used during his first season in 1984 with the Chicago Bulls.
The price paid for the trainers is the highest sum ever paid for any used footwear of any sport. The trainers were bought by a well-known collector, Nick Fiorella.
Jordan is regarded as the best basketball player in the history of the sport. When he retired in 2003, Jordan was also the first billionaire player in NBA history.
Cricketer makes history
English international cricketer, Jos Buttler, scored a century in the Twenty20 World Cup match against Sri Lanka in Sharjah, United Araba Emirates, and became the first England batsman to score centuries in all three formats of the game at the international level: test matches; one day internationals; and Twenty20 internationals.
Buttler is 31 years old and vice-captain of the England cricket team and the Rajasthan Royals, who play in the IPL.
Of his achievement, Buttler commented as follows:
“It’s great. Probably something I look back at some point and it’s a nice accolade to have.”
However, Buttler is not the first international cricketer to achieve this status. That honour goes to Indian woman cricketer, Mithali Raj, who, in July 2021, also became the leading run-scorer in women’s international cricket!
Another cricketer also making history, but for all the wrong reasons, is Azeem Rafiq and his revelations about racism at the Yorkshire County Cricket Club and its wider implications for the game of cricket in England and elsewhere in the world.
Cricket and racism
The Yorkshire County Cricket Club has also been in the headlines because of racism claims made by Azeem Rafiq and this affair has also raised questions about the game more widely and heads have rolled.
This is an affair that is likely to run and run and will be covered on the SLT website!
The Ineos Britannia sailing team, led by Olympian Ben Ainsley, have partnered with Mercedes F1 in a bid to win the next America’s Cup sailing competition. Ineos were eliminated in the Challenger Series in this year’s 36th Cup. Ainsley commented:
“We need to take it to the next level to take on the mighty kiwis, the All Blacks of sailing.”
And the owner of Ineos, Jim Ratcliffe, added:
“What we learned in New Zealand is we had a sailing team capable of winning the America’s Cup but the boat wasn’t good enough. If we don’t have a boat [...] that’s capable of winning, it’s like putting Lewis Hamilton in a slow car.”
Ainsley and Ineos are hoping that, combined with Mercedes F1 technology, involving aerodynamics and hydrodynamics, and the expertise of their sailing team, they can win the next edition of the Cup in 2024.
It will be interesting to see if these hopes are fulfilled; however, the question may well be asked, with such advanced technology, where do sailing skills and seamanship come into the equation?
Transgender issues in sport have also been in the news this year.
A wide-ranging review of transgender inclusion in non-elite sport in the UK, titled Guidance for Transgender Inclusion in Domestic Sport 2021, which was published on 30 September 2021, has found that the current policies are not fit for purpose. Carried out by the Sports Councils Equality Group (“SCEG”) and following an eighteen-months’ consultation, the review shows that:
“For many sports, the inclusion of transgender people, fairness and safety cannot co-exist in a single competitive model.”
The SCEG review does not apply to elite, professional or international sport. In fact, up-dated guidance on the subject from the International Olympic Committee, which last reported in 2015, has been delayed. However, transgender athlete Laurel Hubbard, born a male, made Olympic history by competing in the women’s +87 kg weightlifting event in the delayed 2020 Tokyo Summer Olympics this year.
In October 2020, World Rugby ruled that transgender women may not compete at the elite and international levels of the women’s game “on safety grounds”.
The SCEG review found that:
“While our consultation found that there was widespread support for ensuring that sport was a welcoming place for everyone in society, including for transgender people, it also highlighted that there were concerns relating to safety and fairness in relation to transgender inclusion, particularly in female sport, and that there was no consensus on a single solution as to how this should be addressed.”
However, the SCEG review states that transgender inclusion in sport could be improved by adding new categories of “open” and “universal” to the existing male and female ones.
Josh Cavallo, an Australian professional footballer, hit the global sporting headlines for perhaps all the wrong reasons! On 27 October 2021, the 21-year-old midfielder, who plays for Adelaide United, announced on social media that he is gay. He stated:
“I’m a footballer and I’m gay.”
“All I want to do is play football and be treated equally.”
He is believed to be the first current professional footballer to come out of the closet!
Football is probably the most popular sport in the world and, because of its macho image, only a few retired players have admitted that they are gay, apart from the British player Justin Fashanu, who came out whilst still playing in 1990 and found difficulty in being accepted and committed suicide in 1998.
Cavallo is to be congratulated on coming out and perhaps he will be followed by others in the future.
Certainly, sport in general and football, in particular, should be inclusive and open to all without any discrimination on the grounds of sexual orientation!
Controversial takeover of Newcastle United FC
On 7 October 2021, Newcastle United FC was purchased by a consortium for a reported £ 305 million.
The purchase delighted the supporters of Newcastle, as it brought to an end the 14-year ownership of Mike Ashley, an individual who was unanimously despised by the supporters, due to his perceived lack of ambition for and investment in the club.
The purchase by a consortium is not in itself surprising in football; however, the consortium involved in the takeover of Newcastle was different. The majority purchaser, with an 80% stake in the ownership, is the Public Investment Fund (“PIF”), the sovereign wealth fund of Saudi Arabia. The involvement of the PIF has caused severe criticism by human rights’ groups, who believe that the PIF has invested in Newcastle United, in order to “sportswash” its image and reputation.
It has been reported that the PIF owns the planes that transported the individuals involved in the heinous murder of exiled Saudi journalist, Jamal Khashoggi, to and from Turkey. Furthermore, U.S. intelligence agencies have concluded that the Saudi crown prince, Mohammad Bin Salman, approved the murder of Jamal Khashoggi. The crown prince is the Chair of the PIF and has denied any involvement in the Khashoggi affair.
The consortium that has purchased Newcastle United also consists of PCP Capital Partners, who own 10%, and the Reuben Brothers (RB Sports & Media), who also own 10%.
The repercussions of this takeover will be felt for some time to come!
2021 Summer football transfer window
Continuing with the ubiquitous football, which, despite its financial problems caused by the pandemic, remains the world’s favourite sport, mention should be made of some of the highlights of the Summer 2021 transfer window, which ended at 23:00 BST on 31 August 2021, as noted in the Deloitte Press Release, issued on 1 September 2021, as follows:
“Premier League clubs spend £1.1 billion in the 2021 summer transfer window but overall spending falls for second consecutive year
– Premier League clubs’ gross spend of £1.1bn in the 2021 summer transfer window is 11% lower than the spend during summer 2020 (£1.3bn), which itself was a 9% drop compared to summer 2019 (£1.4bn);
– This is the lowest gross spend by Premier League clubs since 2015, and the first time that there has been a consecutive decline since the global financial crisis (summers 2008 to 2010);
– Deadline day activity totalled £150m, meaning Premier League clubs have spent in excess of £1bn for the sixth summer in a row;
– The volume of players acquired by Premier League clubs on free transfers has increased to 22% of all players-in during this year’s summer transfer window from 20% in summer 2020;
– Premier League clubs’ net player transfer expenditure in this year’s window as a proportion of the clubs’ estimated 2020/21 revenue was 10%, down substantially from summer 2020 (18%);
– Premier League clubs have purchased only six players from Football League clubs compared to 22 in summer 2020, increasing financial pressure on any EFL clubs who were relying on player transfer receipts;
– The German Bundesliga is the only European “big five” league to increase its gross spending this year, whilst also generating a net player transfer income of £35m largely driven by the sale of key players to the Premier League;
– The Premier League’s net player transfer spend of £560m in the year dwarfed that of La Liga (£55m), Serie A (£50m) and Ligue 1 (£15m), further highlighting the financial strength of the league compared to its peers;
– The English Championship clubs gross spend has decreased by £20m (38%) to £35m compared to £55m in summer 2020 which was 64% lower than the £160m gross spend in summer 2019.
The 2021 summer transfer window saw Premier League clubs’ gross transfer spending decrease by 11% year-on-year to £1.1bn, according to analysis from Deloitte’s Sports Business Group. This represents the lowest amount spent by Premier League clubs since the 2015 summer transfer window and is the second consecutive summer transfer window in which Premier League clubs’ spending has decreased.
Dan Jones, partner in Deloitte’s Sports Business Group, commented:
“This has been a remarkable transfer window. Club spending records have been broken, player moves – including the two greatest players of their generation – have grabbed the headlines and Premier League clubs have spent in excess of £1 billion for the sixth summer in a row. Perhaps most remarkable is that all this has been achieved with lower spending than we have seen in the previous two summers.”
“Big six” clubs dominant but clubs are spending more within their means
Arsenal, Manchester United, Manchester City and Chelsea were the top four biggest gross spending Premier League clubs and were responsible for the four highest-value individual transfers this window. All transfers were valued at £50m or more, double the two transfers in summer 2020 of that scale, demonstrating the financial capabilities of the highest revenue generating clubs.
A key metric to understand Premier League clubs’ overall approach compared to previous windows is to assess their net transfer spend as a proportion of their estimated revenue. Last year this totalled 18% compared with an estimated 10% this year, a marked and concerted reduction as clubs look to spend within their means.
Tim Bridge, director in Deloitte’s Sports Business Group commented:
“Whilst this summer transfer window saw gross spending fall by 11%, many would have actually predicted the drop to be much larger. Even with the pressures of a pandemic, there have been a number of high-profile deals, with some of the highest revenue generating Premier League clubs flexing their financial muscles to strengthen their competitive position both domestically and at a European level.”
Outside of the “big six”, significant deadline day activity by West Ham, Leeds United, Brighton and Hove Albion and Crystal Palace contributed £90m (59%) of the total deadline day expenditure, as clubs looked to reinforce their squads with the lucrative aims of achieving qualification for UEFA competition and/or retaining their Premier League status.
Free rein: window sees increase in volume of free transfers
Whilst overall spending decreased, the volume of transfers remains relatively consistent with historic levels, with Premier League clubs having signed 148 players-in (on either a permanent or loan-basis). This compares to 132 transfers-in during summer 2020 and 128 in summer 2019.
Interestingly, Deloitte’s analysis shows that the percentage of players acquired on a free transfer increased from 20% to 22% during this window. Only four Premier League clubs did not acquire a player on a free transfer in the summer window, half the number compared with last year.
“Whilst the volume of transfers has remained consistent, the number of free transfers has increased as have the number of the highest value deals. This reflects twin forces of clubs prioritising financial stability and seeking value in the market while also being willing to pay for the very best talent. This pattern has been reinforced by the financial impact of the COVID-19 pandemic and the relative financial strength of the Premier League clubs compared to some of their European peers.”
European spending dwarfed by Premier League
Behind the Premier League, Serie A €550m (£475m) is the next highest spending league, although Premier League clubs’ gross transfer spend is still more than double that of Serie A clubs.
With the exception of the Bundesliga, gross transfer spend is down for all other “big five” leagues for the second consecutive year. Bundesliga clubs have reported a net surplus of €40m (£35m) which is largely driven by sales to the Premier League of key players such as Jadon Sancho (£73m), Ibrahim Konaté (£35m) and Leon Bailey (£25m).
La Liga clubs are the lowest spenders at a gross level for the second consecutive year. This is largely driven by the relatively restrained spending of Barcelona and Real Madrid, with both generating a net transfer surplus during this window.
“Both of the major Spanish clubs are looking to shore up their finances and, at a time where their stadium redevelopment projects are planned or underway, they have not been able to take their usual approach in the transfer market. Challenging times lie ahead in the short-term for both, who will appreciate the financial boost that return of fans to stadia bring more than most clubs.”
EFL net receipts hit following fewer sales to the Premier League
Championship clubs recorded a gross spend of £35m, almost 100% of the spend in the EFL. Championship clubs have spent 38% less compared to prior year (£55m), which itself was 64% lower than gross spend in summer 2019 (£160m).
Relegated side Fulham accounted for 55% of gross transfer spend in the Championship, largely driven by the purchase of Harry Wilson from Liverpool for £12m. Due to the stretched financial position many Championship clubs find themselves in, the number of clubs that have acquired a player for a fee has reduced from 18 to just seven clubs.
Whilst overall Championship clubs have a net transfer surplus of £60m, this is 77% worse than the prior year due to the post-pandemic market and the substantially lower volume of transfers to the Premier League. Premier League clubs have only purchased six players from the Football Leagues this window compared to 22 in summer 2020.
Dan Jones concluded:
“With reduced activity from Premier League clubs acquiring from the Football League, the financial challenge of running a Championship club is going to be tougher than it ever has been. This is perhaps indicative of Premier League clubs being less willing to take a risk on players unproven at Premier League level, in conjunction with a plentiful supply of more established talent not only in the Premier League but across Europe’s top tier football leagues.”
Summary of key findings from the analysis by Deloitte’s Sports Business Group include:
– Premier League clubs’ gross spend of £1.1bn is 11% lower than the previous summer transfer window of £1.3bn which itself was a 9% fall;
– This is the lowest gross spend by Premier League clubs since 2015, and the first time there has been a consecutive decline since the global financial crisis (summers 2008 to 2010);
– Premier League clubs signed 148 players-in compared to 132 in summer 2020 and 128 in summer 2019;
– Players acquired by Premier League clubs on free transfers has increased to 22% of all players-in during this year’s summer transfer window from 20% in summer 2020;
– There are only four Premier League clubs who did not acquire a player on a free transfer, half the number who did not in summer 2020;
– The number of signings on a free transfer by promoted sides increasing from one in summer 2020 to 11 in this window;
– Clubs are more wary of selling their players as they are no longer in a financial position to replace these players for large transfer fees;
– Premier League clubs’ net player transfer expenditure in this year’s window as a proportion of the clubs’ estimated 2020/21 revenue was 10% down substantially from summer 2020 (18%);
– The number of deals equal to or over the value of £50m has increased to four this year – Ben White (£50m), Jadon Sancho (£73m), Romelu Lukaku (£97.5m) and Jack Grealish (£100m) – all players signed by the top four highest gross spending clubs;
– The number of signings between £10m – £25m has reduced from 33 to 20 indicating that whilst certain clubs are able to take more of a risk with high value transfers, it is the mid-market deals that have been affected most considerably by the wider conditions;
– Premier League clubs have purchased six players from the Football Leagues compared to 22 in summer 2020, causing further financial issues for these clubs;
– Bundesliga is the only other European “big five” league to increase its gross spending this year, whilst also generating a net player transfer income of €40m (£35m) largely driven by the sale of key players to the Premier League;
– La Liga clubs are the lowest spenders at a gross level for the second consecutive year, having been the second highest spending league in the 2019 summer transfer window;
– The Championship clubs gross spend has decreased by 38% compared to summer 2020 (£55m), which was 64% lower than gross spend in summer 2019 (£160m);
– Relegated side Fulham are the largest of spenders accounting for 55% of gross transfer spend, largely driven by the purchase of Harry Wilson from Liverpool for £12m;
– The number of Championship clubs that have acquired a player for a fee has reduced from 18 to just seven clubs;
– Whilst the Championship clubs have a net surplus of £60m, this is 77% less than the prior year.”
Now we turn our attention to the articles that you will find in this issue. As you will see from the Table of Contents, we include a wide range of sports law and sports tax articles, which will engage our readers attention and provide them with much “food for thought”. We would highlight the articles on the taxation of Formula 1. This is a complex subject, with Formula 1 being a global event, as is well observed in the introduction to the article on the taxation of Formula 1 in Canada:
“To the victor go the spoils, but also the taxes. Racing all over the world means that Formula 1 teams and drivers are subject to a multitude of tax regimes. Given the complex and ever-changing global tax landscape, the resources expended by Formula 1, the teams and drivers to ensure compliance with a dozen or more tax regimes are surely enormous.”
We would also draw the reader’s particular attention to the articles on the continuing legal saga involving the controversial South African Olympic middle distance runner Caster Semenya.
As always, we would welcome and value your contributions in the form of articles and topical case notes and commentaries for our journal and also for posting on the SLT dedicated website www.sportslawandtaxation.com.
Finally, we are taking this opportunity of wishing all of our contributors and readers the compliments of the season and all the best in the New Year, notwithstanding the COVID-19 pandemic, and whatever 2022 may bring. Let us hope that some kind of normality will return soon, and, as they say in French: bon courage!
So, now read on and enjoy the December 2021 edition of SLT.
Dr. Rijkele Betten (Managing Editor)
Prof. Dr. Ian S. Blackshaw (Consulting Editor)
 For an explanation of these forms and their individual characteristics and skills, log onto www.icc-cricket.com/about/cricket/game-formats/the-three-formats (accessed 6 December 2021).
 The full review is available at https://equalityinsport.org/docs/300921/Guidance%20for%20Transgender%20Inclusion%20in%20Domestic%20Sport%202021.pdf (accessed 6 December 2021).